Sick & tired of the reporting it’s great news the Fed may be cutting interest rates!
 

The media is downright giddy that the most recent inflation report indicates the Fed might soon be cutting interest rates. Exactly how is that good news for responsible senior citizens who have saved their hard earned money, avoided debt, and want to earn a reasonable real rate of return above inflation on their savings?

If the market reacts in a positive increase to our savings I suggest our investments will earn a reasonable real rate of return.

The average American is not living on income earned from their savings as they have little savings. In fact they have more debt than savings. They have student debt, they have mortgage debt or hope to get a mortgage, they have credit card debt and maybe a car loan debt.

So for most people having a lower interest rate is good news as their mortgage goes down, student loan payment goes down, credit card payment goes down and they can buy a new car. The economy does not and should not be run to benefit wealthy retirees. They're doing fine even if they make less on their CDs and savings accounts.

If you own dividend paying stocks like Chevron for example, the stocks value normally will edge upwards when the interest rates go down as the dividend rate is then effectively offering a larger spread vs CDs.

It's bad news for rich old people only to the extent that they'll have fewer pieces of gold to fill their coffins with when they're buried.

It's good news for anyone who has debt in any legal institution that charges interest.

It has zero impact on anyone who has neither savings nor debt.

Not really true. Higher interest rates do not just apply to individuals but also to businesses. So high rates cost businesses money (other than banks) when they use debt to buy materials, build factories, etc. And that higher cost of money is then passed on to consumers. So lower interest rates benefit consumers whether they have neither savings nor debt.

Once upon a time the media would just report the news

Without a major recession, I doubt that interest rates will drop significantly. The treasury will still need to borrow money to fund the massive budget deficit.

" Since the mid-1940s, the United States has experienced several boom and bust cycles. Why do we have a boom and bust cycle instead of a long, steady economic growth period? The answer can be found in the way central banks handle the money supply.

During a boom, a central bank makes it easier to obtain credit by lending money at low interest rates. Individuals and businesses can then borrow money easily and cheaply and invest it in, say, technology stocks or houses. Many people earn high returns on their investments, and the economy grows.

The problem is that when credit is too easy to obtain and interest rates are too low, people will overinvest. This excess investment is called “malinvestment.” There won’t be enough demand for, say, all the homes that have been built, and the bust cycle will set in. Things that have been overinvested in will decline in value. Investors lose money, consumers cut spending and companies cut jobs. Credit becomes more difficult to obtain as boom-time borrowers become unable to make their loan payments. The bust periods are referred to as recessions; if the recession is particularly severe, it is called a depression." ("Boom and Bust Cycle: Definition, How It Works, and History", Adam Hayes, Investopedia dot com, 5/19/2024)

What is the common denominator? IMO, greed. And not a few boneheaded government actions.

Raise rates, and the economy crashes.
Cut rates and the dollar crashes.
Pick your poison.

That's pretty histrionic, don't you think?
neither will happen as the Fed will only change by 1/4 of a percent this month,
and that is not enough to change anything, even 1/2 of a percent, its not enough to change anything momentarily, especially with the 18-24 month effect to the economy

The interest rate curve is primary shaped by the treasury, as they auction bills, notes and bonds at various total amounts. Mortgage rates are already down by about 1 percentage point, and nothing much has changed in the housing market.

So, meh, right now, is all about inflation expectations and real rates shifting the curve down somewhat, and everyone waiting on the Treasury QRA for borrowing requirements. . How much more will be needed to fund the choices of congress and the current and past presidents?

In July, on a new home in TV I got a 30 year rate quote of 7% from Citizens First.
Tuesday I got a rate of 5.875% on a 30 through National Bank of Kansas City (nbkc).
Loan officer claims rate cut has already been built into the market.

I agree. Often, the Fed will lower interest rates so low that it rewards borrowers and punishes savers. People should be encouraged to save money and to avoid debt. The market should determine interest rates, not the Fed. That is my opinion.

Please explain.

Yes, 40% of Americans DO NOT have $400.00 in their “cookie jar” when they need it. Can you imagine? That is roughly 134,000,000 Americans.

Boom bust cycles have been going on since the founding of our country. The Fed was established to modify the highs and the lows. Over the past 40 years, I would say that they have done a reasonable job.

IMO manipulation and Ponzi schemes ever since gold standard was axed for paper money. :loco: yes I know I have weird opinions.. :icon_bored:

Not on this planet…:oops:

They still do but now it's fake. :cus:

Mortgages were over 8% for my entire working life, until the gooberment blew up the economy giving way mortgages to people who refused to pay them back, and the whole thing came crashing down in 2008. Heck, my Grandparent's 20-year, $5,000 mortgage was over 5%! My father's 20-year $18,000 mortgage was 4% (thanks to the Nixon/Carter inflation)! My first home was 18% for a 30-year, $80K mortgage, because that's what it took to fix the Nixon/Carter inflation. And still, my savings NEVER hit 0.01% until 2008. Before 2008, the gooberment was never so cruel as to force me compete with their printing press!

There is NOTHING "normal" about a 3% mortgage or 0.01% passbook savings rate. The passbook savings rate was 4.25% for 100 years prior to 2008. NORMAL is when a bank pays you 4.25% to save your money with them, so they can loan it back out for 8%. But the gooberment's magic money machine makes your savings account a mere nuisance. The bank gets its money direct from the FED, not you.

"Normal" ended in 2008.

Harsh. Maybe they are concerned about needing expensive in-home care when they are older. Or supporting their unemployed adult children. Or something else.

Not true. Unless your investment portfolio is 100% stocks, bond rates and values are very sensitive to interest rates.

They used to! Now they tell us what they want us to think.

Most Americans don't have ANY "investment portfolio." Bond rates and values don't affect them at all. I have stock in one company. Current value is around $6,000. It was worth something like $325 when my grandmother bought it for me. If Intel goes bankrupt I'll be out nothing, since I never invested a dime of my own money into it. I have no pension, no 401K, no IRA, no annuities. Most Americans with a 401k only get to invest a small percentage of their paycheck into a limited list of fund options. Since their contribution is matching, they'll come out ahead no matter what happens to bond rates and values.

Except you weren't talking about 'most Americans'. You were talking about wealthy retirees in TV. Who presumably have diversified portfolios including bonds.

Your words: "It's bad news for rich old people only to the extent that they'll have fewer pieces of gold to fill their coffins with when they're buried."

Not investment advice, but you might want to think about diversifying that Intel stock into an S&P 500 fund or something.

When return on CD/Treasuries was above 5%, I moved excess cash into those. When it drops, it's time to invest with the fixed income money I have made. If we go into recession, then I can pick up stocks cheaper.

Yes, I'm only 60 so I have some runway.

Depends on how big airplane is?:shrug:

You hit the nail on the head. Now everyone needs to get rich in the stock market so prices are super-inflated to feed the masses. It's ridiculous, every medical supply, service and so forth is also super-priced along with everything we touch. And the pyramid scheme goes on and on.

I think if interest rates paid on personal savings accounts tanks again, everyone should pull their money out of banks even if it bites. Let them get their free money from the government for their mortgages and such.

You need to take action now before the rates drop. There are still safe investments out there that will pay you 5%++. But don’t wait too long.

Seems like anyone living in TV in that situation would have to be sitting on a significant stockpile of money just to cover home, food and modest entertainment costs for several decades.

I bought last August and I am at 6.875. I didn't know they were already below six. I might still wait, holding out hope they'll go to the low 5%

With our 2.8% mortgage on Villages home I think I’m good for awhile to keep putting my money into CDs/Treasuries then stocks on the upcoming BIG dip.

My advice to young people has always been to avoid debt and to save money. I don't agree that buying a house with a large mortgage is a good idea, or that it necessarily creates wealth. I have a sizable savings account, but I am not dependent on it. I don't think that artificially lowering interest rates to below the inflation rate is a good idea. It encourages borrowing instead of saving. Also, it has nothing to do with being selfish.

Federal reserve
 

The federal reserve is not a branch of our government. Its board members are all from big banks . I truely believe the fed should not be involved in setting interest rates . Supply and demand should determine interest rates . Let banks compete for our money .

People talk about savers like they are putting their money under their mattress or at a bank savings account. You should never have a savings account because you will never make any money. You should be in the market with all your money. Create a bucket system to live on but even have your bucket that your living on invested in money market, everything else in stocks/funds.
Realistically, by the time you retire, you shouldn’t have any debt, enough $$$ to live on without any worries, and if you don’t, you didn’t plan well when you were younger and working. If you would have invested $100 a month say in ibm or in apple in your 20’s, you would have enough money to do whatever you want now. You would have over $1M in wealth. If you would have increased this amount each time you got a raise or got a better paying job, you would have much more. But people didn’t, most spent as much as they made.

As for interest rates, we all benefit, especially investors over time. The last decade before 2021 is proof of that. Interest rates drop tech stocks and small caps will surge, in time, and all the people with variable interest rates will benefit. Home prices will skyrocket because you are going to have a lot more people that now can afford the home they have always wanted so it will be a sellers market. Lately with the higher rates, it’s been a buyers market.

Agree with you. The problem is people do not have to take a required class in economics and financial management. As a result too many people will lose out on being financially responsible.

Can you help me find them ???

The budget deficit would be improved if the income brackets were adjusted back to help the middle class.

That explains why the FED must work hard to KEEP rates correct as much as possible.

A 3% mortgage could be "normal" when the inflation rate is ZERO percent.

Even during the Depression, when the money was DEFLATING, mortgage interest rates never hit 3%.

Nobody in their right mind -- and certainly not a bank -- would voluntarily create a business around a 3% profit that requires a 20 year risk. You need government dumbassitude to create that level of lunacy.

What's really asinine is that right now, for the first time in human history, it is actually possible to create 0% inflation and a stable economy. All it would take would be to take the creation of money out of human hands and write a computer program that in real time matches the money supply to the growth of the GDP. We will never in our grandchildren's lifetimes see such sane management of the economy.

As long as a politician has something to gain from it, there will always be a knob on the Magic Money Machine that can be turned up to "11", just in time for the next election..